The property market isn’t like the stock market, where you purchase items for a fixed, predetermined price. It’s more like a street market, where the price is decided by mutual agreement between buyer and seller.
As all people are different, you’ll get different outcomes from each negotiation. Emotion has a lot to do with it. If you’re buying or selling your own home, you’ll pay the retail price. But as investors, we want to play the wholesale price.
To do this, you don’t go out and look for below market value property. You look for motivated sellers.
How do you find them… traditionally, you look for the three D’s:
However, during Covid, these three traditional routes have been an anomaly. The government has put a hold on debt/repossessions. Sadly death has crept up. However, with lockdown, the probate process has been slowed down, and everything is taking longer. But happily, the divorces rate has slowed down during this time.
But as we come out of lockdown it may give rise to the usual 3D rule and we get back to a feeling of normality!
So while this may sound grim, the truth is that you’re finding a solution, a win win for both parties.
Debt: If you’re being repossessed, you’re liable for that debt for years after you’ve lost the house. Banks can come after you just when you’re getting back on your feet. In addition, your credit rating falls off a cliff which leads to long term struggles.
Therefore, agreeing on a deal, which may be below market value, it’s a lot better than being repossessed by the bank.
Divorce: At a time of splitting, it’s an immensely stressful time. Do people really want the hassle of tidying up, organizing the house before people come traipsing around your house checking out your curtains? It just adds to all the stress.
Furthermore, in addition, people get caught in the chain, and the purchase falls through. 1 in 3 sales fall through, plus it’s taking something north of 3 months to complete.
For an investor, with your power team and access to money and a firm promise, a quick sale can be worth its weight in gold. It’s not similar to the second-hand car market. You can sell it online with lots of tyre kickers or a ‘we buy any car’.
You’ll get a cheaper deal, but you’ll walk out of there with cash in your hand.
Systemising your luck…
You need:
Toolbox for coming up with finding the solution to their problem. You have to figure out what the problem is for resolving their issue. Too often, people try to offer one solution, i.e. purchase lease option. However, there are many more, delayed completion, vendor finance, assisted sale and many others.
So to get the best solution, you need to meet the vendor and find out what they actually want. The magic wand question…..
‘if I had a magic wand, where would you like to be at the end of this negotiation’ apart from finding out about their price, more importantly, you’ll find out about their end game and what they’re hoping to achieve. From that, you can work backwards to help them achieve it… Engineer a Solution!